STATE BANK OF SOUTHERN UTAH
Mr. Robert E Feldman
Executive Secretary
Attention: Comments/Legal ESS
FDIC
550 17th Street, NW
Washington, DC 20429
RE: RIN Number 3064-AC50: FDIC Proposed Increase in the Threshold for
the Small Bank
CRA Streamlined Examination
Dear Sir:
I am a Vice President of State Bank of Southern Utah, located in
Richfield, Utah, which is a city of approximately 7,000 residents. Our
lending area is considered Sevier County, which has a population of
approximately 20,000 people. My bank has total assets of about $375
million and has only recently become subject to the large bank CRA exam
this year. I am writing to strongly support the FDIC’s proposal to raise
the threshold for the streamlined small bank CRA examination to $1
billion without regard to the size of the bank’s holding company. This
would greatly relieve the regulatory burden imposed on many small banks
such as my own under the current regulation, which are required to meet
the standards imposed on the nation’s largest $1 trillion banks. I
understand that this is not an exemption from CRA and that my bank would
still have to help meet the credit needs of its entire community and be
evaluated by my regulator. However, I believe that this would lower my
current regulatory burden by reducing the time and cost by 90% (our CRA
audit this year under the “large bank” criteria for CRA took 10 times as
long with basically the same result).
I also support the addition of a community development criterion to
the small bank examination for larger community banks. It appears to be
a significant improvement over the investment test. However, I urge the
FDIC to adopt its original $500 million threshold for small banks
without a CD criterion and only apply the new CD criterion to community
banks greater than $500 million up to $1 billion. Banks under $500
million now hold about the same percent of overall industry assets as
community banks under $250 million did a decade ago when the revised CRA
regulations were adopted, so this adjustment in the CRA threshold is
appropriate. As FDIC examiners know, it has proven extremely difficult
for small banks, especially those in rural areas, to find appropriate
CRA qualified investments in their communities. Many small banks have
had to make regional or statewide investments that are extremely
unlikely to ever benefit the banks’ own communities. That was certainly
not the intent of Congress when it enacted CRA.
An additional reason to support the FDIC’s CD criterion is that it
significantly reduces the current regulation’s “cliff effect.” Today,
when a small bank goes over $250 million, it must completely reorganize
its CRA program and begin a massive new reporting, monitoring and
investment program. If the FDIC adopts its proposal, a state nonmember
bank would move from the small bank examination to an expanded but still
streamlined small bank examination, with the flexibility to mix
Community Development loans, services and investments to meet the new CD
criterion. This would be far more appropriate to the size of the bank,
and far better than subjecting the community bank to the same large bank
examination that applies to $1 trillion banks. This more graduated
transition to the large bank examination is a significant improvement
over the current regulation.
I strongly oppose making the CD criterion a separate test from the
bank’s overall CRA evaluation. For a community bank, CD lending is not
significantly different from the provision of credit to the entire
community. The current small bank test considers the institution’s
overall lending in its community. The addition of a category of CD
lending (and services to aid lending and investments as a substitute for
lending) fits well within the concept of serving the whole community. A
separate test would create an additional CD obligation and regulatory
burden that would erode the benefit of the streamlined process.
I strongly support the FDIC’s proposal to change the definition of
“community development” from only focusing on low- and moderate-income
area residents to including rural residents. I think that this change in
the definition will go a long way toward eliminating the current
distortions in the regulation. We caution the FDIC to provide a
definition of “rural” that will not be subject to misuse to favor just
affluent residents of rural areas. I serve on the Sevier County Economic
Development Committee where we discuss ways to get business to relocate
to our area or expand their business if they are all ready here. We are
constantly being told that economic growth in our area will come, for
the most part, from existing business expanding their business.
Therefore, many if not most of our commercial lending would qualify for
CRA. For example, a few years ago a trailer manufacturing company from
Texas opened a plant in our area. Because of various reasons, the main
being mis- management, they closed the plant and went back to Texas. One
of their employees, a local young man, had the vision and belief that he
could start his own trailer business and make it work. Our bank lent him
the start-up money and he has grown to over $3million in sales and over
20 employees who are paid above average wages for our area. Each loan we
do for them helps them expand their business and employ more people.
In conclusion, I believe that the FDIC has proposed a major
improvement in the CRA regulations, one that much more closely aligns
the regulations with the Community Reinvestment Act itself, and I urge
the FDIC to adopt its proposal, with the recommendations above. I will
be happy to discuss these issues further with you, if that would be
helpful.
Sincerely,
Dean L Woodbury, VP
State Bank of Southern Utah
